Question

In: Accounting

Since managerial accounting does not follow strict reporting requirements like financial accounting do you see any...

Since managerial accounting does not follow strict reporting requirements like financial accounting do you see any ethical issues that may arise? Should there be specific reporting requirements ?Do not forget APA format on your sources, in-text citations.

Solutions

Expert Solution

Financial accounting works mostly for external users. They may be investors, creditors, auditors or analysts. This type of business accounting is supposed to correspond to specific principles and guidelines Generally Accepted Accounting Principles. These principles outline the major rules according to which the company’s accounting processes should be conducted and managed. Besides, they define the standards and terms for issuing reports on the company’s financial information.

Managerial accounting is concerned with providing information to managers that is people inside the organisation who direct its operations

ETHICAL ISSUES arise are :

since managerial accounting could be confidential and are done as per management’s preferences that leaves a lot of decisions to subjective judgment. As one of the primary purposes of managerial accounting is self- monitoring within a firm, it can lead to personal preferences, biases and favoritism, or even sabotage due to interpersonal rivalry in the firm.

The Institute of Management Accountants, USA lists four areas of ethical concerns. They are:

1. Competence

2. Confidentiality

3. Integrity

4. Credibility

Providing wrong information or wrongly accounting for financial information can gravely hurt the corporation for they will not be able to get the true picture. By the time they can figure out that something is wrong in the managerial accounting much damage could have occurred and the existence of the corporation could be in jeopardy. Additionally, a failed corporation could negatively affect employment and income of employees. This in turn can impact families and potentially neighborhoods and towns


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